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15 August 2007
Lend Lease exceeds profit expectations and extends development pipeline for long term earnings growth
 | FY2007 Statutory Profit of A$497.5 million after tax – up 20%
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| Net Operating Profit after tax up 26% to A$445.9 million
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| Final dividend up 35% to 42 cents per share
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| Full year dividend up 26% to 77 cents per share
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| Retail & Residential Development pipeline A$45 billion
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| Construction Backlog Gross Profit Margin increased to a record A$792.9 million |
Lend Lease Corporation Limited (“Lend Lease”) delivered a strong Statutory Profit of A$497.5 million after tax for the year ended June 2007. This includes A$32.2 million after tax in interest from the Australian Taxation Office (“ATO”) as a result of the long running dispute which has now been resolved. Statutory Profit also includes net gains from property investment revaluations of A$51.6 million after tax.
Excluding the ATO interest noted above, Net Operating Profit was A$413.7 million after tax, up 17% on the result for the prior year. This exceeds market consensus and is well ahead of management’s objective of achieving an average growth in earnings per share (“EPS”) of 10% p.a. over a five-year period.
Reflecting its strong performance, Lend Lease declared a final dividend of 42 cents per share franked to 50%, bringing total dividends for the year ended June 2007 to 77 cents per share, 26% higher than the previous full year dividend. The full year dividend represents a payout ratio of 69% of after tax operating earnings, within the Board’s current target payout range of 60-80%.
(1) Excluding ATO interest of A$32.2 million, Net Operating Profit to June 2007 was A$413.7 million after tax
(2) The final dividend is 50% franked; the interim dividend for the period ended December 2006 was 50% franked
Lend Lease Managing Director and CEO, Greg Clarke, said the Company maintained strong momentum in earnings growth, while significantly expanding its pipeline of projects which will deliver long term earnings streams from its Development, Construction and Investment Management businesses.
“Net operating earnings exceeded market expectations despite the provision made in the UK construction operations during the first half and the tough residential market in Australia. This demonstrates the resilience of the Group’s diversified operations. Actus Lend Lease in the US, the Investment Management business and Bovis Lend Lease in Asia Pacific all made stand-out contributions and our Retail & Communities business secured a number of major new projects,” Mr Clarke said.
“The Company continued to recycle its capital, realising approximately A$1.1 billion in proceeds while re-investing around A$1.3 billion in its pipeline to secure future earnings growth opportunities. Importantly, at June 2007 Lend Lease had increased its invested capital base to A$4.4 billion from A$4.1 billion at June 2006.
“Lend Lease enjoys very strong operating cash flows and is well placed to deliver continued earnings and dividend growth to drive shareholder value over the medium to long term,” Mr Clarke said.
Group Chief Operating Officer, Ross Taylor, said Lend Lease maintained strong momentum in building its pipeline of development, construction and investment management opportunities.
“We had a successful year in terms of securing a number of high quality projects such as Stratford City Athletes Village, which will generate long term, integrated earnings from our development, construction, asset and investment management operations,” Mr Taylor said.
“The Group also made good progress in extending its integrated operating strategy into the UK, US and Singapore.
“Lend Lease finished the year with a Retail & Communities development pipeline of approximately A$45 billion, and a Construction Backlog Gross Profit Margin of A$792.9 million, a record level.
“Bovis Lend Lease performed strongly in Asia Pacific, the Americas and Continental Europe, and we have stabilised the UK operation following the first half provision.
“We continue to identify and deliver investment opportunities for our clients in the Investment Management business in Asia Pacific such as Somerset Central in Singapore and 420 George Street in Sydney, and we are well placed to create new opportunities for investors around development assets in the UK over the next two to three years,” Mr Taylor said.
Major development pipeline additions during the year ended June 2007 included:
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| Rocky Springs – a new community project with a potential 13,000 lots in Australia;
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| The A$730 million Somerset Central retail development in Singapore;
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| Two new US military base privatised housing projects with an initial construction value of approximately US$450 million; the first stage of a base hotel lodging redevelopment program valued at US$400 million; and the Group’s first two private sector residential community project sites in the US; and
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| The £5.5 billion Stratford City redevelopment project. |
Post the year end, Lend Lease continued to add to its pipeline in the UK with the recently announced £$1.5 billion mixed-use, inner urban regeneration project at Elephant & Castle in London and a 50% interest in the £600 million retail and residential urban regeneration project at Preston.
The Investment Management business continued to contribute to the Group’s integrated business model. Major initiatives included creation of the Lend Lease Asian Retail Investment Fund with its seed asset being 75% of the Somerset Central development and the launch of the Lend Lease Communities Fund 1, which acquired interests in several Delfin Lend Lease land development projects. Funds Under Management, excluding joint venture interests, increased by 27%.
Group Financials
Lend Lease performed well against its key financial performance indicators.
Earnings per share continued to grow in line with operating earnings and return on equity exceeded management’s targeted 15% p.a. for the first time since the Group was restructured in 2003. Interest coverage was 7.9 times, comfortably in excess of the targeted minimum 6 times, and 84% of the Group’s debt is at fixed rates with long term maturity. Annuity style earnings from property assets and Funds Under Management represented 23% of total earnings, well above the target of 15-20%, which supports the Group’s investment grade credit rating.
Group Finance Director, Steve McCann, said: “Lend Lease maintains a very robust financial position, with significant capacity to fund growth opportunities. Gross Debt to Total Tangible Assets stood at 15.6% at 30 June 2007.
“Our target gearing range is 30-40%, but the strong cash flows from recycling capital have meant we were able to expand the development pipeline and increase the Group’s invested capital base during the year, without significantly increasing debt.
“However, the Group’s current three year business plan envisages an increase in debt. We expect to reach the lower end of our target gearing range by the end of the plan period. This takes into account investment in our current development pipeline and continued capital recycling,” Mr McCann said.
Outlook
Mr Clarke said while the Australian residential market remained patchy, the Group’s US and UK Retail & Communities businesses maintained a good outlook and global construction markets were buoyant.
“We have an excellent platform in each of the businesses in each of our regional markets, and increasingly the three businesses are working together to secure longer term projects that will deliver multiple earnings streams for Lend Lease.
“Lend Lease is well placed to deliver ongoing growth in shareholder value,” Mr Clarke said.
Further information:
Sally Cameron
Lend Lease Corporation
Tel: 02 9236 6464 | John Frey
Cosway Australia
Tel: 0411 361 361 |
Attachments:
Financial Reports:
Consolidated Financial Statements [pdf - 652kb]
Five Year Profile [pdf - 68kb]
Management Discussion and Analysis [pdf - 228kb]
Porfolio Report [pdf - 197kb]
Appendix 4e [pdf - 65kb]
Directors' Report [pdf - 597kb]
Concise Financial Report [pdf - 732kb]
Investor Briefing Presentation [pdf - 1.14mb]
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